A new formula for some linear stochastic equations with applications

Abstract

We give a representation of the solution for a stochastic linear equation of the form Xt = Yt + ∫(0, t] X s- dZs where Z is a càdlàg semimartingale and Y is a càdlàg adapted process with bounded variation on finite intervals. As an application we study the case where Y and -Z are nondecreasing, jointly have stationary increments and the jumps of -Z are bounded by 1. Special cases of this process are shot-noise processes, growth collapse (additive increase, multiplicative decrease) processes and clearing processes. When Y and Z are, in addition, independent Lévy processes, the resulting X is called a generalized Ornstein-Uhlenbeck process. © Institute of Mathematical Statistics, 2010.